Stretch your salary with these saving tips

Right now, many of us are looking for ways to beat the economic effects of the pandemic. For those racked with even more expenses and possibly, less income, getting their finances back on track might seem overwhelming. Proper budgeting is even more essential to getting the most value out of your savings or government aid.

Here are some great saving tips that I’ve learned over the years as a finance professional.

1. Start learning about money as early as possible.

It’s best to start saving and learning about money soon as you’re exposed to having an allowance or earning income. Building good money habits from early on will help ensure your financial fitness later in life.

I learned how to manage my money in school and from parental advice, but only truly appreciated these lessons when I started working. My education has provided a good foundation for my present financial habits and enabled me to create a financial plan that best fits my needs. 

I believe that everyone can benefit from financial education, although it wasn’t very accessible in the past. Fortunately, there are now many programs out there that are spreading this essential knowledge to even more people across the country.

2. When in need of financial advice, turn to an unbiased source.

The best place to look for financial advice is from those with a balanced and objective view. Often, an advisor or solicitor will have an agenda to sell insurance or an investment. And while theoretically everyone should have access to these things, most would take the expert’s word for it and either overload on insurance, or take on investments without understanding the risks. 

Consulting someone with a balanced, objective view allows you to assess the pros and cons, cost and benefit of how a financial decision will affect your life. Don’t be shy to ask questions and assess the advice you’re being given!

3. Learn how to plan a realistic budget.

My philosophy when it comes to saving and budgeting is just this – keep it simple.

I follow this train of thought:

• How much am I earning?
• How much do I need to allocate for my needs?
• How much can I set aside for savings or investment?
• How much can I use for my wants?
• Am I happy with my current budget or do I need to make adjustments?

The suggested budget breakdown is 50% for needs, 30% for saving and investment, and 20% for wants. However, this might not be appropriate for everyone’s situation.

Here’s a plan that anyone can follow: work with what you’ve got. Set a target. Plan a budget, follow the budget, reach your goals. Repeat.

4. Think of savings as a “must-have” on your budget.

Many of us love to spend, but have yet to truly understand and appreciate the benefits of saving and investing. However, more and more people are realizing that spending on needs over wants and saving for rainy days do actually pay off, especially during times like these.

For those in the lower income bracket, every peso will hold higher significance. Adjust the 50-30-20 rule to accommodate your needs and then savings, even if it means that you won’t have much to spend on your wants. Those who are quicker to understand that money is an asset and not just a tool for spending will start thinking of ways to maximize their earnings by turning money into productive sources of income.

5. Turn a portion of your savings into passive income by taking on investments.

Any money that you save can be used for something productive or income generating.

There are many options out there that you can use to maximize your savings, such as insurance, VULs, Stocks, Bonds, Mutual Funds and UITFs. 

For some, these terms might seem intimidating. But the truth is that availing of these investments isn’t as complicated or expensive as people think.

The key will be to find an investment that matches your profile as an investor, and know the potential risks and potential rewards of each. There’s no such thing as one “perfect” investment. It’s a matter of finding the mix of assets to suit your financial goals.

6. Work on building your money discipline

Kobe Bryant once said don’t count on motivation, count on discipline. When times are tough, your financial wellbeing will come down to how disciplined you are in following your budget, and adjusting it when needed. 

There are many digital services available to help us build money discipline. For example, you can make use of the auto-transfer function in your mobile banking apps to schedule a portion of your salary into a separate bank account meant for savings. Alternatively, you can also use platforms like First Metro Securities to automatically transfer funds to an Online Trading/Investment Account and automatically invest in the mutual funds or stocks of your choice.

The most successful people understand that their savings can also be turned into a stream of income. With the right mindset and some research, anyone can work towards this goal.

If you’d like to learn more about managing your finances and assets like stocks or mutual funds, check out First Metro Securities. Anyone can open an account online and have access to all stocks and the leading mutual funds in the Philippines. Send me an e-mail at mtarog@firstmetrosec.com.ph if you’d like to continue the discussion.